Although commodity prices are notoriously difficult to forecast, the overriding cycle is usually pretty predictable. Commodities generally swing between states of overproduction and high inventory levels to states of underproduction and low inventory levels. Along the way, you can often mark transitions from one state to another by noting whether companies are bringing new production on line or shutting down capacity.

As such, silver bugs may be a bit alarmed that silver mining and exploration company Apex Silver (AMEX:SIL) has actually begun to make progress toward hauling metal out of the ground.

Grand Cayman-based Apex has long talked about its San Cristobal project in Bolivia -- purportedly the second-largest silver reserve in the world, assuming that the reserve projections are accurate -- but held off development of the mine for years while awaiting better metal prices.

Of course, that hasn't stopped investors from bidding up the company to nearly $1 billion in market capitalization -- making it one of the 20 largest gold/silver mining companies traded on U.S. exchanges.

With prices now sufficiently high in management's view, infrastructure work has gotten under way, and the company expects to begin commercial production of silver, zinc, and lead in the second half of 2007.

With no production to date and none expected for at least two more years, investors have bid this stock up on the hopes of what they think a share's worth of ownership means. While the company has estimated reserves in excess of 456 million ounces of silver (along with 7.7 billion pounds of zinc and 2.8 billion pounds of lead), that "estimated" is the tricky part -- and no one can say for sure what the real reserves are like until mining begins.

And that's all to say nothing of the risks inherent in a one-mine company. (True, Apex has other properties, but they're nowhere near development at this point.) Natural disasters, work accidents, government problems, and bad reserve estimates could all bedevil investors with silver stars in their eyes.

Attempting to come up with a fair valuation on Apex shares is speculative almost to the point of ridiculousness. After all, you not only have to guess the future market prices for silver, lead, and zinc, but you also have to speculate on how much Apex will actually be able to mine and how efficient those operations will be.

In other words, there are so many moving parts involved that you can pretty much assign almost any value you like to these shares. A good guess probably falls somewhere between "nada" and "a whole lot."

Honestly, whether Apex's San Cristobal proves to be one of the great silver finds isn't really that interesting to me. What is interesting, though, is what this potentially says about the metal markets.

After all, if prices are finally high enough for Apex to begin digging, you can assume that other miners with other properties around the world are thinking along the same lines. We know that large diversified mining companies like BHP Billiton (NYSE:BHP) and Rio Tinto (NYSE:RTP) are also stepping up production, and it doesn't take a lot of new supply to push prices back down.

So while investors dreaming of hitting the mother lode may want to stick with Apex Silver, this Fool is going to be keeping a careful watch on other miners, with an eye toward whether this bull run in metals has reached at least a momentary transition point.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned.